What do you need to open a business bank account?

You've heard the saying about not mixing business with pleasure, but have you been applying that to your finances?

Opening a business bank account can help you keep your business and personal finances separate, and it may even limit your personal liability in company matters. Business bank accounts work similarly to consumer accounts, but they typically feature elements tailored toward specific business needs, such as seamless integration with business tools. The benefits they tend to provide are usually invaluable to business owners at all stages, whether you’ve just established a sole proprietorship or are a growing limited liability company (LLC).

If you’re ready to streamline your accounting and tax processes, expand your business’s purchasing power and more, then a business bank account may be your solution. Here’s everything you should know before opening one.

What you’ll learn:

• Opening a business bank account can help you separate your personal and company finances. It also allows you to take advantage of benefits designed for business owners. 

• Typically, businesses will need their Employee Identification Number (EIN), business documents and an initial deposit to open a bank account. These requirements can vary depending on the bank and business structure.

• Capital One offers a variety of business banking products, resources and digital tools that can help fuel your company’s growth.

With the right documents, opening a bank account for a business is generally a simple process. There are several documents and pieces of information you may need to open a business bank account. It can vary depending on the bank, but here’s some general information that banks may request to see before you can open an account.

Your business’s federal employer identification number (FEIN, also known as an EIN or tax identification number) is essentially its Social Security number (SSN). Sole proprietorships and single-member LLCs with no employees may not need an EIN. If your business doesn’t have an EIN, you may be able to use your SSN to open a business bank account.

Information needed to open a business bank account often includes:

• Personal information, like name, date of birth and SSN

• Contact information, including phone number and email address

• U.S. address (not a P.O. Box) and owner establishment date

• Business license

• Business formation documents 

• Business ownership agreements

• Legal name and type of business

• Business establishment date with signer’s full name

• Ownership structure and number of employees

• Percent of ownership and annual gross revenue

A business bank account often requires an initial deposit at account opening. The amount of the initial deposit may vary by financial institution and account type. For example, a business savings account may require a higher initial deposit than a business checking account. Most initial deposits range from $5 to $1,000 and may align with the account’s minimum required balance.

There are several different types of business bank accounts for you to consider, each with its own benefits, features and considerations, which may vary between financial institutions. With each of these accounts, the terms will presumably vary by the financial institution. Consider consulting different banks to get information on their account fees, interest rates, account limitations and minimum balance requirements.

Checking accounts for businesses are similar to common personal accounts. A business checking account can help you manage your business expenses while keeping personal expenses separate. They typically allow you to make deposits and withdrawals, write checks, make wire transfers and use a debit card for the account to make purchases or withdrawals. They are also usually insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000. There are pros and cons to using a checking account for your business banking needs, such as:

Advantages:

• May offer introductory or promotional periods with additional benefits

• May integrate with other business tools, like accounting software

• May pay out interest on your balance

Considerations:

• May have monthly account maintenance fees

• May require you to maintain a minimum balance

• May have fees for large transaction volumes, deposits over a certain amount or early account termination

Savings accounts for businesses are also similar to consumer savings accounts and are typically FDIC insured up to $250,000. Here are some things to keep in mind when determining if a savings account is right for your company:

Advantages:

• Earn interest on your savings account balance

• May not have transaction limits, as federal laws limiting business savings accounts to six withdrawals per month have ended

• Can be linked to your business checking account to prevent overdrafts

Considerations:

• May require a minimum balance to earn interest

• May have withdrawal limits, depending on financial institution

• May have monthly maintenance fees

Merchant services accounts allow your business to accept and process debit and credit card payments. Merchant services accounts are linked to your primary business bank account, and they verify funds before depositing them into your primary account. They charge a fee per transaction, usually a percentage (such as 1.5% or 3.5%) of the transaction amount. Here are some advantages and considerations of merchant services accounts:

Advantages:

• Verify that customers have enough available funds to cover their purchase

• Protect sensitive customer information, providing extra security

• Allow you to accept a popular payment method, potentially improving revenue and customer satisfaction

Considerations:

• May have setup, monthly, annual and incidental fees, like charge-back or statement fees

• May have a processing time that delays access to your money, which may range from a few hours to a few weeks depending on the payment processor

• May need strong business creditworthiness or high net worth to be approved for a reliable merchant services account

Different entities often need different documentation to open a business bank account, in addition to the EIN and other basic personal information.

Sole proprietorships typically need:

• Business license 

• Business name registration certificate or “doing business as” (DBA) documentation

• EIN, if applicable, or SSN

• Government-issued photo identification

• Details about the organization, like industry type and business contact information 

• Personal information and contact details

Partnerships, which include general partnerships, limited liability partnerships (LLPs) and limited partnerships, typically need:

• Business license and business name registration 

• A signed and dated partnership agreement

• Certified evidence of registration with the secretary of state

• Business details

• Personal contact information

LLCs typically need:

• Business license

• Signed and dated operating agreement 

• Certified certificate of organization

• Business details

• Personal contact information

• Additional documents if the LLC is doing business under a different name

Corporations typically need: 

• Business license

• Corporate bylaws 

• Certified articles of incorporation

• Business details

• Personal information for those on the application

• Additional information if the business is operating under a different name

As a business owner, you’ve got a busy life. Between adjusting pricing strategies and maintaining positive client relationships, there isn’t much room for sorting through scrambled finance sheets or mixed expenses.

A business bank account may make your life easier by separating your personal and business finances.

At Capital One, each business is unique and deserves unique banking solutions. Explore business checking products from Capital One, which offer convenience, control and exceptional perks.